FederalReserveNotes ("FRNs"):Demos
v. Kincheloe (ED Wash 1982) 563 F.Supp 30 (sounding as a civil rights claim);
similarly Zeissig v. US (1976) 211 Ct Claims 313; Ginter v. Southern (8th Cir
1979) 611 F2d 1226 cert.denied 446 US 967; Richardson v. State of Utah, the
Fourth Circuit Court, et al. (10th Cir unpub 9/16/94); DeLaRosa v. Agents for
International Monetary Fund (ED Cal unpub 10/12/95) 76 AFTR2d 7134; US v.
Greenstreet (ND Tex 1996) 912 F.Supp 224; Juneau County v. Baritsky (Wisc.App
unpub 8/25/94) rev. denied (Wisc.Supm unpub 12/14/94) 527 NW2d 335(t); DeJulis
v. Alexander (D Wyo 1975) 393 F.Supp 823; Hartman v. Switzer (WD Penn 1974)
376 F.Supp 486; Nixon v. Phillipoff (ND IL 1985) 615 F.Supp 890 aff'd 787 F2d
596(t) (court referred to the Legal Tender Cases (1884) 110 US 421 which held
that Art. I sec.8, cl.5 of the US Constitution gave Congress the authority
"to coin money and regulate the value thereof" and this gave
Congress exclusive authority to determine that Federal Reserve Notes are legal
tender everywhere); ditto US v. Rifen (1978) 577 F2d 1111; ditto Richardson v.
Sullivan (10th Cir unpub 6/18/93) 996 F2d 331(t) cert.den 510 US 1138;ditto (Congressional determination of FRNs as legal tender is
conclusive on state and county govts and will not be challenged by the courts)
Allen v. Craig (1977) 1 Kan.App.2d 301, 564 P2d 552; ditto State v. Dennis (Wis.App
unpub 12/13/83) 117 Wis.2d 782(t), 343 NW2d 830(t); ditto ("Congress has
exercised this power by ... the definition of FRNs as legal tender, 31 USC
sec. 392. ... There can therefore be no challenge to the legality of federal
reserve notes.And we take
judicial notice of the fact that FRNs are valued in dollars.") US v.L.G. Anderson (10th Cir 1978) 584 F2d 369; ditto ("It remains only
for us to state that the US Congress is the only entity empowered to declare
what shall be deemed legal tender.Congress
has so declared.31 USC sec. 392
provides that FRNs shall be legal tender for all debts and taxes.This unique and broad power of Congress to declare what shall
be money and to regulate its value for all purposes has been constitutionally
recognized.") Trohimovich v. Director of Wash. Dept of Labor &
Industries (1978) 21 Wash.App 243, 584 P2d 467; ditto Milam v. US (9th Cir
1974) 524 F2d 629;ditto Harrell
v. CIR (6/15/98) TC Memo 1998-207 ("Petitioner's most clearly stated
explanation is that he was paid in FRNs, which are not lawful money and which
are worthless.Yet, petitioner
used the supposedly worthless FRNs to pay his expenses.We do not believe petitioner really thought that the FRNs were
worthless."); (FRNs are money, they are not counterfeits of "lawful
money", they are measured in dollars and loans made with, and contracts
to pay in, FRNs are valid and enforceable) Kauffman v. Citizens State Bank of
Loyal (Wis.App 1981) 102 Wis.2d 528, 307 NW2; (the Kauffman case "laid to
rest" any argument that FRNs are not real money) Rock County Savings
& Loan Co. v. Tracy (Wis.App unpub 5/14/82) 107 Wis.2d 746(t), 322 NW2d
700(t); (in fact, FRNs are real enough that trying to pass forgeries is
prosecuted under 18 USC 472 as counterfeiting) US v. Grismore (10th Cir 1977)
564 F2d 929 cert.den 435 US 954; (paychecks and other checks received by perp
are taxable income, notwithstanding that checks can be converted only into
FRNs and not into gold or silver) US v. Wangrud (9th Cir 1976) 533 F2d 495
cert.den 429 US 818; (in a conviction for mail fraud, not a defense that the
defendant obtained only FRNs or checks which were cashed into FRNs, on the
pretext that FRNs are worthless and therefore his scam did not amount to fraud
because not obtaining something of value) US v. Anderson (8th Cir 1970) 433
F2d 856; and cf. Kauffman v. Citizens State Bank of Loyal (Wis.App 1981) 102
Wis.2d 528, 307 NW2 (FRNs are not counterfeit money);ditto ("We do not believe petitioner would have continued for so
long to exchange his labor or services for the right to receive worthless
paychecks or worthless currency.Again,
we do not believe petitioner really thought that the Federal Reserve Notes
were worthless.") Harrell v.CIR
(6/15/98) TC Memo 1998-207; R.K. Williams v. CIR (10th Cir unpub 7/28/98) 153
F3d 730(t), 98 USTC para 50604; J.B. Smith v. US, IRS, et al. (D. Ida unpub
7/30/93);similarly Farber v.
Mossman (SD Iowa unpub 2/26/79) 43 AFTR2d 979, 79 USTC para 9256 (alleging
that he was bankrupt in 1979, thereby not suitable for taxation, because of
the 1933 Gold Repeal); ditto (claiming that by the 1933 Gold Repeal
"Congress temporarily relieved me of my right to pay my debts")
Allen v. Cantrell (D Kan unpub 12/27/78) 79 USTC para 9171, 43 AFTR2d 710;(FRNs are legal tender, measured in dollars, and the use of FRNs by
state and municipal govts and courts is not a violation of US Constitution,
Art.I sec. 10) Rothacker v.Rockwall Country Central Appraisal District (Tex.App 1985) 703 SW2d
235; ditto State v. D.R. Gibson (1985) 108 Ida. 202, 697 P2d 1216; State v.
Schimmels (Wis.App unpub 5/23/84) 119 Wis.2d 902(t), 350 NW2d 743(t); State v.
Dennis (Wis.App unpub 12/13/83) 117 Wis.2d 782(t), 343 NW2d 830(t);(where perp argued whether the court could insist that fines be paid in
paper money, the court mooted the point by announcing it would accept US
coins) City of Billings v. Skurdal (1986) 224 Mont 84, 730 P2d 371 cert.den
481 US 1020; Fadden v. Comm'r of Revenue (Minn. Tax Ct unpub 3/11/85)
("We do not understand appellant's claim [that FRNs are not legal tender]
since the decision simply provides that appellant must pay the amount stated
therein.If he wishes to pay this
by some other form of legal tender, he may do so."); (tired to argue that
he could not be required to pay for a drivers license or car registration, nor
the fine for unlicensed driving, because of the lack of gold coinage) Lowry v.
State (Alask.App 1982) 655 P2d 780;(and
where the perp refused to pay his license fees in FRNs because FRNs are not
gold or silver, the court emphasized that he had NOT attempted topay in gold or silver either) State v. Dennis (Wis.App unpub 12/13/83)
117 Wis.2d 782(t), 343 NW2d 830(t);(complained
that having to pay court fines in FRNs violated his religion, "the court
characterized this claim as patently frivolous") Morehouse v.US Dept of Justice (ND Tex unpub 6/8/98); ditto Tinsley v.CIR (ND Tex 2/9/98); ditto (a repeater arguing about "lawful
money" and his religious objections)Ex Parte Brand (Tex.App 1992) 822 SW2d 636 andBrand v. State (Tex.App 1992) 828 SW2d 824; ditto Pyne v. Meese (1985)
172 Cal.App.3d 392, 218 Cal.Rptr 87 (refused to pay his license tag fees in
FRNS and instead presented his own funny money pretending to be payable at
some unknown date in gold, and was surprised when his car was towed) Pyne v.
Meese (1985) 172 Cal.App.3d 392, 218 Cal.Rptr 87;tried to persuade a state court to declare FRNs unconstitutional.Skurdal v. State (Wyo.Supm 1985) 708 P2d 1241 ("perhaps the most
frivolous appeal ever filed here"); similarly Herald v.State (1984) 107 Ida 640, 691 P2d 1255; similarly Brobeck v. CIR
(7/8/80) TC Memo 1980-239 aff'd (3d Cir 1982) 681 F2d 804(t);(use of FRNs by municipal police and traffic court does not thereby
make a traffic case into a federal case nor does it make enforcement or
traffic laws a "commercial" activity subject to the UCC) Kimmell v.
Leoffler (Tex.App 1990) 791 SW2d 648; [-- the UCC itself explicitly says that
"money" is not a negotiable instrument within its meaning and that
UCC Art.3 (Negotiable Instruments) does not apply to money; UCC sec.
3-102(a)];(FRNs are
legal currency, and the govt's use of FRNs does not waive its sovereign
immunity)N.J. Wilson v. US (D
Colo unpub 5/5/98) 81 AFTR2d 2240 suit dism with prejudice (D Colo unpub
8/21/98) 82 AFTR2d 6239; (altho govt bonds and obligations are exempt from
taxation, under 31 USC sec. 3124, FRNs are explicitly not in this category and
are taxable as well as usable to pay taxes. Jackson v. Comm'r of Revenue (Minn
Tax Ct unpub 4/19/84); ditto Provenza v. Comptroller of the Treasury (1985) 64
Md.App 563, 497 A2d 831; citizens and taxpayers lacked standing, as such, to
bring suit to challenge the validity of the Federal Reserve Act. Horne v.
Federal Reserve Bank of Minneapolis (8th Cir 1965) 344 F2d 725;

relying on the Coinage Act of 1792 (1 Stat 246;
this set the original value in weight of gold or silver of US coins, but the
US Supreme Court, in the Legal Tender Cases [Knox v.Lee, 1870] 79 US (12 Wall) 457, said that the Coinage Act had been
amended several times by 1870, -- the gold measurements were changed in 1834
& 1837, and silver measurements in 1853 --, and it has been further
amended since then so that absolutely nothing remains now of the 1792 original
act; by 1872 when the Revised Statutes were published only sec. 20 of the 1792
act survived, as RS sec. 3563(and
that section said only that US money was measured in dollars, dismes [dimes],
cents and milles), and then this lone surviving section was repealed [96 Stat
1084] and replaced in 1982 by 31 USC sec. 5101 (the repeal enabled US courts
in multinational cases to award damages calculated in foreign money); In the
Matter of Oil Spill by Amaco Cadiz (7th Cir 1992) 954 F2d 1279 at 1328): US v.Shields (8th Cir 1981) 642 F2d 230 cert.den 454 US 848;Harrell v.CIR (6/15/98)
TC Memo 1998-207; Mathes v. CIR (5th Cir1978) 576 F2d 70 cert.den 440 US 911; Bates v. US (7th Cir 1939) 108
F2d 407 cert.den 309 US 666;US
v. Rifen (1978) 577 F2d 1111; Gajewski v. CIR (11/10/76) 67 Tax Ct 181 aff'd
(8th Cir 1978) 578 F2d 1383;Cavanaugh
v. CIR (8/19/91) TC Memo 1991-407 aff'd (10th Cir unpub 2/9/93) 986 F2d
1426(t); Jenny v. CIR (1/3/83) TC Memo 1983-1 (oddly enough, perps'tax returns refused to recognize as income anything not received in
gold or silver but thoroughly recounted expenses and deductions which
certainly had been paid in paper); similarly further history of the changes ofthe amount of gold until that provision was effectively superseded in
1972 and formally repealed in 1982. Baird v. County Assessors (Utah 1989) 779
P2d 676;similarly
(protester cited Coinage Act, "This statement reflects petitioner's
misconception ... that 'dollar' is an indefinable term and that he cannot
measure his income, file returns, or pay tax until 'dollar' is defined."and protester sent letters to his bank and employer, threatening to sue
them if they provided any info to the IRS "before requring the IRS to
define dollar".) Wilber v. CIR (8/31/87) TC Memo 1987-439 aff'd (8th Cir
unpub 11/10/88) 871 F2d 1092(t); Pouncy v. First Virginia Mortgage Co (4th Cir
unpub 4/3/95) 51 F3d 267(t); Cohn v. Tucson Electric Power Co. (1983) 138 Ariz
136, 673 P2d 334; ("Spurgeon's contention that a dollar is not a form of
money but merely a unit measure which cannot be taxed is clearly
frivolous.") US v. Spurgeon (8th Cir 1982) 671 F2d 1198;even while sec.20 survived it only dealt with "how we talk about
our money, including how we talk about it in judgments", but does not
relate to whether money is acceptable in paper or only in precious metal.
County of Dane v. Kreyer (Wis.App unpub 4/27/82) 107 Wis.2d 744(t), 321 NW2d
367(t);(perp not allowed to
present text of Coinage Act to jury because judge is the jury's authority for
applicable law) US v. Willie (10th Cir 1991) 941 F2d 1384 cert.den 502 US
1106; in fact, if the taxpayer is paid in silver coins instead of paper money,
the IRS can tax that income at the higher numismatic market value of the coins
rather than their face value.Joslin
v.US (10th Cir 1981) 666 F2d
1306; (tax evasion organization enjoined from preaching that FRNs are not real
money nor countable as income) Blaty v. CIR (10/1/84) TC Memo 1984-518; [under
a 1985 law, the US govt is not permitted to pay out any gold coin, and pays
only in current US paper money and (non-precious metal) coinage, 31 USC sec.
5118];

claimed that the dollar sign is meaningless or
ambiguous: R.K. Williams v. CIR (10th Cir unpub 7/28/98) 153 F3d 703(t), 98
USTC para 50604; US v.Shields
(8th Cir 1981) 642 F2d 230 cert.den 454 US 848; ("The contention that the
use of "$" as the dollar sign ... creates an ambiguity is the height
of absurdity.")US v.Rickman (10th Cir 1980) 638 F2d 182; US v. Brown (10th Cir 1979) 600
F2d 248;(insisting that
"$" means only gold and silver coinage) Brobeck v. CIR (7/8/80) TC
Memo 1980-239 aff'd (3d Cir 1982) 681 F2d 804(t); ditto Gajewski v. CIR
(11/10/76) 67 Tax Ct 181 aff'd (8th Cir 1978) 578 F2d 1383; ditto US v.Kelley (9th Cir 1976) 539 F2d 1199 cert.den 429 US 963;(pretending that he did not understand a court order imposing a
monetary fine because the amount used a dollar sign with only one vertical
linethrough it; enjoined from
further litigation) Salman v.Jameson
(D Nev unpub 4/14/97) 97 USTC para 50452, 79 AFTR2d 2667; {NOTE:F.Cajori, A History of
Mathematical Notations (vol.2,
LaSalle, IL, 1929, reprinted NY, Dover 1993) p.15, sec. 402 et seq, discusses the origins of the dollar sign and
acknowledges that few other symbols have had "less real scientific
study"; almost certainly the folklore that $ is a monogram for US is
wrong because the symbol is found in Europe and Spanish colonies before 1776
(and before the minting of the first US dollar in 1794), apparently as an
abbreviation for the Spanish peso or pieces of eight, called in
England a Spanish dollar, particularly because from around 1661 that Spanish
dollar bore the numeral 8 between two upright Roman pillars (the $symbol presumably emulates the I8I image - these coins were sometimes
called "pillar dollars", or the letters P and S overwritten); very
convincing likenesses of the modern dollar sign are used for the Spanish
peso in manuscripts from New Orleans in 1778 and in a diary kept in 1776
by New York legislator Ezra l'Hommedieu (who wrote it sometimes with one
stroke and sometimes with two), and it first appears in print in America for a
"federal dollar" by 1797.Joel Munsell covered the same theories in his Typographical
Miscellany (NY 1850, reprinted NY, B. Franklin, 1972) p.86, and further
suggested that it might be a monagram formed by linking two uppercase Ds - the
upper D rotated halfway, or a monogram for pesos fuertos ("hard
pesos") or just fuertos, known to have been abbreviated by a
lowercase script F doubled or by combining the lowercase F and S.Nobody seems to have speculated that the S was intended as an English,
German or other initial for Spanish, silver, sterling, etc.}; (claimed he did
not know whether the word Dollars in the IRC was used as a noun or an
adjective [!?]) US v.Scott (ND
Ind unpub 2/4/98) 81 AFTR2d 1076 judgmt entered (ND Ind unpub 10/8/98);
(pretended that because the documents associated with his debt used the
amounts without a dollar sign, the transaction had no value and he owed
nothing)US v. Schiefen (D SD
1995) 926 F.Supp 877 affd 81 F3d 166 mand.denied 522 US 1074; (on the other
hand, if someone is paid in coins which are not currently circulating legal
tender -- e.g. gold or collectors coins -- that payment is taxed not merely at
the face value of the coins but at the fair market value for collectable
coins, per 26 USC 1001(b), which is usually much higher) Wm.R. Smith v.CIR (4/23/98) TC Memo 1998-148; {Note: Some tax protesters have argued
about the distinction between FRNs and "lawful money",on the assumption that the latter means precious metal.The old paper money, especially before 1934, contained a statement that
the paper money was "redeemable in lawful money" at Federal Reserve
banks, but under an 1862 Act of Congress which persisted until 1982 (RS sec.
3588, former 31 USC sec. 452) declared that US paper money is "lawful
money and a legal tender in payment of all debts, within the US, except for
duties on imports and interest on the public debt", so (at least from
1933, when the law was changed [48 Stat 112, ch.48] to restrict the Treasury's
sale of silver and gold to the public)the
Federal Reserve system would redeem paper currency with other denominations of
paper currency or with ordinary (non-precious) coins;the expression "lawful money" and the restriction about
payment on duties and interest on the public debt were dropped when the title
was revised and enacted as positive law in 1982 (current 31 USC sec. 5103), so
there is nothing in the law now that requires (or entitles) paper currency to
be redeemed with precious metal.Several
court decisions have clearlytreatedUS paper currency as "lawful money"; e.g., Norman v.Baltimore & Ohio R.R. Co.(1935)
294 US 240 at 306; US v.United
Fruit Co. (D.Mass 1923) 292 Fed
308; and similarly sec. 13 of the Federal Reserve Act (now amended as 12 USC
sec. 342) in its original text used "lawful money" to indicate
government-authorized currency (including paper money) issued by the Treasury,
and to distinguish that from financial instruments such as checks issued by
banks.The Rickman decision,
noted above, regarded Federal Reserve Notes as lawful money for the ordinary
purposes of calculating income for taxes.}

{This
has long been a favorite hobby-horse of cranks and mountebanks, who argue that
Federal Reserve Notes and other paper currency are not "real money"
and therefore tax or counterfeiting laws cannot be applied to paper currency.They usually refer to the US Constitution, Art.I, sec.10, which says
that "No State shall ... coin money, ... make anything but gold and
silver coin a tender in payment of debts" -- but this clause is a
restriction only of state govts and not of the federal govt; Merchants Nat'l
Bank v.US (1879) 101 US 1; Radue
v. Zanaty (1975) 293 Alab 585, 308 So.2d 242; Gehring v. All Members of the
State Legislature (1994) 269 Mont 373, 889 P2d 1164; DeLaRosa v. Agents for
International Monetary Fund (ED Cal unpub 10/12/95) 76 AFTR2d 7134;Lowry v. State (Alask.App 1982) 655 P2d 780; Chermack v. Bjornson
(1974) 302 Minn 213, 223 NW2d 659 cert.den 421 US 915;if a state govt attempts to issue its own currency it cannot compel
anyone to accept its currency and an individual may validly refuse to accept a
state's currency and insist on payment in US currency.Veazie Bank v.Fenno
(1869) 75 US (8 Wall.)533; the
state govts are not required to use only gold or silver in transactions but
are required to also use US currency.Nixon
v.Phillipoff (D.Ind.1985) 615 F.Supp 890
aff'd 787 F2d 596; Chermack v.Bjornson
(1974) 302 Minn 213, 223 NW2d 659 cert.den 421 US 914; Cohn v. Tucson Electric
Power Co. (1983) 138 Ariz 136, 673 P2d 334; Bey v. Hutcherson (EDNY unpub
7/28/95); (and states are not required to treat payment in gold or silver
coins as superior in face value to FRNs) Howe v. Comm'r of Revenue (1987) 401
Mass 1005, 515 NE2d 1190;(states
are not required to accept funny money that pretends to be paid someday in
gold) Dack v. State (Ind.App 1983)457
NE2d 600; Nichols v. Comm'r of Revenue (Minn. Tax Ct unpub 1/16/84); State v.
Schimmels (Wis.App unpub 5/23/84) 119 Wis.2d 902(t), 350 NW2d 743(t).The Constitution, Art.I,
sec. 8, cl.5, gives the Congress the power "to coin money, regulate the
value thereof, and of foreign coin".This gives the Congress a power denied to the state govts.Legal Tender Cases (1870) 79 US (12 Wall.) 457; Houston v.Moore (1820) 18 US (5 Wheat.) 1; Larned Production Credit Assn v.
E&E Feeding (1982) 8 Kan.App.2d 263, 655 P2d 1; N.J. Wilson v. US (D Colo
unpub 5/5/98) 81 AFTR2d 2240 suit dism with prejudice (D Colo unpub 8/21/98)
82 AFTR2d 6239.The Congress may
declare paper money to be legal tender, legally acceptable for any transaction
(as it has done with FRNs in 31 USC sec. 5103), and the Congress is not
required to have that paper money consistently represent a fixed amount of
either gold or silver.Legal Tender Cases (1870) 79 US (12 Wall.) 457; Juillard v.Greenman (1884) 110 US 448;DeLaRosa
v. Agents for International Monetary Fund (ED Cal unpub 10/12/95) 76 AFTR2d
7134 (*"The US Congress has the power to make anything it wishes legal
tender.Congress is not limited
to gold or silver."); ditto Lowry v. State (Alask.App 1982) 655 P2d 780.The Supreme Court, back when gold and silver coins were still the
medium of exchange, said that the metallic content of the coins themselves was
not the money but that " the gold or silverthing we call a dollar is in no sense a standard of a dollar.It is representative of it." Legal Tender Cases (1870) 79 US (12
Wall) 457 at 552; Ling Su Fan v.US
(1910) 218 US 302 at 310-311; Bates v. US (7th Cir 1939) 108 F2d 407 cert.den
309 US 666; Jersey City & Bergen RR Co.v.Morgan (1895) 160 US
288 (silver dollar's value not affected by loss of weight from abrasion);
Gajewski v. CIR (11/10/76) 67 Tax Ct 181 aff'd (8th Cir 1978) 578 F2d 1383;
Levin v. Dare (Bankr., SD Ind 1996) 203 Bankr.Rptr 137.One historic reason for this was that, at the time the Constitution was
written, no significant sources of gold or silver were known to exist in North
America (the first US gold nugget was found in 1799, and the first US silver
mine was discovered in 1839), so that European govts could completely
manipulate an American currency based on gold or silver.In its earliest years the Congress did not attempt to mint its own
silver or gold coins but merely adopted certain European coins, or
occasionally melted and restruck European coins; the restriction on the states
in the Constitution essentially meant that if a state government wanted to use
something other than US currency its only option was to use existing
(European) coins of a known (and Congressionally regulated)value.Even now,
a return to gold as legal tender would mean that the value of US money could
be pushed and pulled from a distance by Nelson Mandela, whose country of South
Africa is the leading gold producer.The
Constitutional clause that Congress would "regulate the value" of US
money further suggests that paper money, or at least non-intrinsic coinage was
intended, because the value of coinage that is intrinsically valuable on the
basis of its metallic content would automatically be regulated by the
international market prices of the metals rather than by Congress. The
significance of gold and of the utilization of a gold standard in US monetary
history has been much misunderstoodand
exaggerated; cf.K.W. Dam, From
the Gold Clause to the Gold Commission, 50 Univ. of Chicago Law Rev. 504
(1983), A.V. Pai, Congress and the Constitution: The Legal Tender Act of
1862, 77 Ore.L.Rev. 535 (1998),and
E.Vieira, The Forgotten Role
of the Constitution in Monetary Law, 2 Texas Review of Law & Politics
77 (1997); L.D. Solomon, Local Currency: A legal and policy analysis, 5
Kan.J.of Law & Public Policy 59 (1996).One purpose of the 1933 Gold Repeal was to spare
debtors, of whom there were a lot in 1933, from being whiplashed with
increased prices as a result of the devaluation ofthe US dollar. Rudoph v. Steinhardt (11th Cir 1983) 721 F2d 1324. }

Funny
money:Issuing phony negotiable instruments: Under the guise
of "certified money orders" with instructions and small print that
this is "pretend money". US v. Mikolajczyk (5th Cir 1998) 137 F3d 237
reh.den 144 F3d 53 cert.den (as Koehler, Slater and O'Neill) _US_, 119 S.Ct 250;
ditto US v. Moser (5th Cir 1997) 123 F3d 813 cert. denied 522 US 1035; ditto
(Leroy Schweitzer cautioned his followers that "Leroy checks" would be
rejected by banks and could get them arrested and they must use his "proof
packages" to induce suckers to accept the checks) US v. J.V. Wells (4th Cir
1998) 163 F3d 889;(even though,
from the fine print, these did not fit the legal definition of checks or money
orders because not an unconditional promise to pay) Ford Motor Credit Co. v. All
Ways Inc. (1996) 249 Neb 923, 546 NW2d 807; (scheme described in detail,
instructions even told users this was "pretend money", prosecuted for
various kinds of bank fraud and for postal fraud for mailing a "certified
money order" to a creditor) US v. Moser (5th Cir 1997) 123 F3d 813 cert.
denied 522 US 1035; (similarly with funny money that says it will be payable at
some unknown future date when the US resumes using gold, the perp admitted that
the paper was worthless at the time he used it for purchases, and this is
sufficient to prove fraudulent intent) State v. Hernandez (La.App 1987) 503
So.2d 1181; (it is not necessary that the govt or bank go through all the real
or imagined rituals trying to cash the funny money, it is sufficient that the
instrument does not meet the legal criteria for a proper financial instrument
for it to be held worthless) State v. Hansen (Minn.App unpub 2/26/91); similarly
(sufficient that the instrument could not be collected via "normal banking
channels") General Motor Acceptance Corp v. Visocky (Kan.App 1988) 758 P2d
753; similarly (cannot pretend that using worthless funny money is "payment
in kind" for bona fide loan or debt involving real credit or merchandise or
US paper money) Ferguson Pontiac-GMAC Inc v. Henson (Okl.App 1994) 892 P2d 657;(Montana Freemens "lien drafts" are "essentially
worthless" and using one to obtain merchandise is fraud) US v. Greathouse (D.Kan
unpub 2/5/97); (Montana Freemens purportedmoney orders were worthless and used a bank account number
which had once belonged to the federal district court in Montana - it had been
created to hold an unnecessary $100 bond in a civil suit filed by a Freemen long
ago; cf. Billings Gazette, 3/20/98 -and
which had never held more than a few hundred dollars but which had already been
closed because the Freemen had attempted to write checks against it, the mayor
who tried to deposit these money orders into the township's bank account was
removed from office pending criminal prosecution ) Klock v. Town of Cascade
(1997) 284 Mont 167, 943 P2d 1262; (the "Leroy Checks" - whether
calling themselves checks or money orders or certificates or warrants, and they
usually had more than one title on the same document - used by the Freemen and
the similar checks used by Elizabeth Broderick had printed on the faceand just above the signature - usually rubberstamped - of the
"issuer", the words "without recourse" -- in legitimate
financial transactions this might be written on the back of a
third-party check by an intermediate payee, but with this funny money
it was evidently intended to make the check uncollectible and worthless from its
commencement -- it did not save them from prosecution; C. Connolly,
"Oddities on Checks Help County Office Pinpoint Phonies,"Omaha [Neb.] World-Herald, 11/6/95 p.9sf; "Fight with
Feds Spills into Utah", Salt Lake Tribune, 1/25/96 p.B1 -- indeed,
UCC sec. 3-414 does not allow the drawer of a check to evade liability this way.It is possible that these mountebanks hit upon the ploy of calling their
worthless paper "warrants" because of an earlier case involving a
forged municipal warrant, in which the court expounded at length howthis particular crime was very difficult to prosecute because warrants
are legally distinguishable from every other sort ofnegotiable or financial instrument, People v.Norwood (1972) 26 Cal.App.3d 148, 103 Cal.Rptr 7).The same sort of worthless funny money has been labeled as a "Public
Office Money Certificate"(PMOC) and carries some text that pretends that a
govt office, such as the Post Office or the Treasury, will accept and cash it.Cohn v. Tucson Electric Power Co. (1983) 138 Ariz 136, 673 P2d 334; Pyne
v. Meese (1985) 172 Cal.App.3d 392, 218 Cal.Rptr 87; US v. Grosshans (6th Cir
1987) 821 F2d 1247 cert.den 484 US 987;(sometimes
claiming to be payable by a state govt agency) State v. Taylor (La.App 1986) 495
So.2d 996 writ denied (La.Supm 1987) 499 So.2d 84 cert.denied 484 US 812;(it is "a contrived promissory note with no real value.... It is
tendered as a promise to pay when a 'proper' official determination is made as
to what type of currency has been authorized as a substitute for gold and
silver" [essentially an impossible future date]) Federal Land Bank of
Spokane v. Parson (1989) 116 Ida 545, 777 P2d 1218; Parson v. State (1987) 113
Ida 421, 745 P2d 300; Becker v. Dept of Registration (1987) 159 IL.App.3d 796,
513 NE2d 5; ditto (funny money not only required that determination but also
that it be presented within 90 days!) Dack v. State (Ind.App 1983)457 NE2d 600; ditto Nichols v. Comm'r of Revenue (Minn. Tax Ct unpub
1/16/84);(perp admitted that his
POMC was worthless, at least at the time he used them) State v. Hernandez (La.App
1987) 503 So.2d 1181;Passing
a phony "certified money order" does not satisfy a debt and
constitutes criminal fraud or theft of the merchandise. Nasir v. Anderson (D NJ
unpub 8/25/97); ditto US v.Jacobs
(2d Cir 1997) 117 F3d 82; ditto US v.Moser
(5th Cir 1997) 123 F3d 813 cert.den (12/15/97) 522 US 1035; dittoUS v.Van Shutters (6th Cir1998) 163 F3d 331 cert.denied _US_, 119 S.Ct 1480; ditto US v.
Stockheimer [& Peth] (7th Cir 1998) 157 F3d 1082 (includes photocopies of
Peth's funny money); ditto State v. Taylor (La.App 1986) 495 So.2d 996 writ
denied (La.Supm 1987) 499 So.2d 84 cert.denied 484 US 812;(similarly not a payment oftaxes)
Federal Land Bank of Spokane v. Parson (1989) 116 Ida 545, 777 P2d 1218; ditto
Niles v. Trawick (1986) 99 Pa.Commnw. 170, 512 A2d 808; (similarly not a payment
of license fees or fines) Parson v. State (1987) 113 Ida 421, 745 P2d 300; ditto
Becker v. Dept of Registration (1987) 159 IL.App.3d 796, 513 NE2d 5; ditto Dack
v. State (Ind.App 1983)457 NE2d
600; ditto State v. Abrams (1984) 209 Mt 508, 680 P2d 585; ditto State v. Dennis
(Wis.App unpub 12/13/83) 117 Wis.2d 782(t), 343 NW2d 830(t); ditto County of
Dane v. Kreyer (Wis.App unpub 4/27/82) 107 Wis.2d 744(t), 321 NW2d 367(t);(similarly tendering such funny money does not constitute paying for a
purchase and the merchandise must either be returned or regarded as stolen) Ford
Motor Credit Co. v. All Ways Inc. (1996) 249 Neb 923, 546 NW2d 807; Ferguson
Pontiac-GMAC Inc v. Henson (Okl.App 1994) 892 P2d 657;State v. Hernandez (La.App 1987) 503 So.2d 1181; (ditto for phony
"certified bankers cheque") Pouncy v. First Virginia Mortgage Co (4th
Cir unpub 4/3/95) 51 F3d 267(t); ditto Ferguson Pontiac-GMAC Inc v. Henson (Okl.App
1994) 892 P2d 657 (Peth would issue a worthless CMO and then "pay" it
with an equally worthless CBC); ditto US v.Stockheimer [& Peth] (7th Cir 1998) 157 F3d 1082 (Peth's CMOs and
CBCs both said only that they'd pay according to [sec. 20 of]the Coinage Act of 1792 [a law and section no longer in effect]"from the time of the official determination of the substance of
said money" [since that act and section had been completely repealed by
1982 this actually meant "never"] or in "credit money", when
presented to Peth but giving a P.O. Box address); Federal Land Bank of Spokane
v. Parson (1989) 116 Ida 545, 777 P2d 1218; Parson v. State (1987) 113 Ida 421,
745 P2d 300; (this imposed a condition upon payment and therefore the check did
not qualify as a negotiable instrument) Bank One of Columbus v. Sparks (Ohio
App. unpub 3/15/96); (ditto, the reference to the Coinage Act is a stipulation
not contemplated by the UCC and the check is not a negotiable instruments and
the debts were never discharged) Ford Motor Credit Co. v. All Ways Inc. (1996)
249 Neb 923, 546 NW2d 807;(ditto
for phony "certified IRS sight drafts", described by the originator to
a co-conspirator as a "charade" with the warning not to show it to
accountants or lawyers) US v.Wiley
(5th Cir 1992) 979 F2d 365;(ditto
for "Public Office Money Certificate" even with the argument that FRNs
are no better) US v. Van Skiver (D Kan unpub 12/13/90) 71A AFTR2d 4063, 91 USTCpara 50017 aff'd US v. Kettler [& Van Skiver](10th Cir unpub 6/3/91)
934 F2d 326(t); (tendering a "Public Office Money Certificate" as
payment for car registration meant the registration fee had not been paid, and
the perp could later be charged with driving an unregistered vehicle) State v.
Dennis (Wis.App unpub 12/13/83) 117 Wis.2d 782(t), 343 NW2d 830(t); (using such
funny money is evidence in an unrelated case - involving tax evasion - that this
perp was not acting in good faith and had fraudulent intent) US v. Grosshans
(6th Cir 1987) 821 F2d 1247 cert.den 484 US 987;(ditto for worthless "sight drafts" issued by "Common
Title Bond and Trust" with instructions that "This draft is redeemable
in a certificate of credit at full face value when presented to the issuer at
his place of residence",legitimately
a sight draft is an unconditional instrument for immediate payment
usually associated with a letter of credit but here were entirely bogus and
added an explicit restriction that it would be paid only after a future - and
impossible - event) First National Bank & Trust Co.v. Miller (1989) 233 Neb 434, 446 NW2d 11; American Federal Savings Bank
v. Peterson (Minn.App unpub 8/30/88); ditto (convicted of theft by swindle which
does not require the state to prove that the sight draft is totally worthless)
State v.Keeney (Minn.App unpub
10/25/88); similarly (sufficient to reject this funny money because it cannot be
collected via "normal banking channels" and the govt or bank is not
required to do extraordinary or peculiar things to try to collect) General Motor
Acceptance Corp v. Visocky (Kan.App 1988) 758 P2d 753;ditto Federal Land Bank of St. Paul v.Brakke (No.Dak.Supm1988) 417
NW2d 380; ditto State v. Hansen (Minn.App unpub 2/26/91); similarly (convicted
of counterfeit obligations for attempting to pass Leroy Checks even though no
bank had actually cashed any of them) US v. Rudd (9th Cir unpub 2/17/99) 172 F3d
60(t);(ditto for "fractional
reserve note" which appears to be another IOU signed by the debtor) Federal
Land Bank of Spokane v. Parsons (1990) 118 Ida 324, 796 P2d 533; similarly Apex
Financial Corp v.DeRiemer (Del.Super.unpub 6/22/87) app.dism (Del.Supmunpub
8/4/87) 530 A2d 673(t) app.dism (Del.Supm unpub 8/24/88) 547 A2d 633(t); (the
fractional reserve note was described by its originator as a joke; NY
Times, 12/7/87 p.22);similarly
("certified promissory money note" not a payment of mortgage) In re
Walton (Bankr.ND Ohio 1987) 77
Bankr.Rptr 617; similarly State v.Keeney
(Minn.App unpub 10/25/88); similarly Federal Land Bank of St. Paul v.Brakke (No.Dak.Supm
1988) 417 NW2d 380;similarly
(using fictitious warrants to post bail for two prisoners and to redeem property
seized by the govt, prosecuted as a criminal conspiracy to counterfeit
non-federal securities and to defraud a bank, under 18 USC 513 & 1344,
sentenced to five years) US v. Ries (9th Cir unpub 1/22/97) 106 F3d 410(t)
cert.den 521 US 1126 (subsequently sentenced to another 7½ years for his part
in a plot to stalk and brutally beat the county recorder who refused to accept
his bogus liens; Sacramento Bee, 10/30/97 p.B3); attempted to pay court
fine with "public money note" and was sent to jail.Moore v. Surles (ED NC 1987) 673 F.Supp 1398; it is not a defense to a
charge of fraud that a bank had cashed the money order if the bank subsequently
found that it was worthless, nor is it a defense to try to blame the bank for
refusing to cash the dubious money order at first sight because this is not
essential to the crime of fraud.US
v.Moser (5th Cir 1997) 123 F3d 813
cert.den (12/15/97) 522 US 1035; a common scam by the Montana Freemen and others
was to overpay a debt or a purchase with a fake check for double or more the
proper amount and demand change in real money, this was often done with
purported payments to the IRS but the govt successfully prosecuted this under
the False Claims Act (the overage being refunded being the false claim) US v.
Ward (9th Cir unpub 5/13/99); US v. Napier (6th Cir unpub 12/29/98) 172 F3d
874(t); US v. Rosnow (8th Cir 1992) 977 F2d 399 cert.den (as Dewey) 507 US 990;
similarly in the case of Horace Groff, see Lancaster [Penn.] New Era, 21
June 1999;(a non-political
bank swindle, fabricating phony checks from foreign banks for deposit in his
account and immediately withdrawing the pretended amounts) Prushinowski v.US (SDNY 1983) 562 F.Supp 151 aff'd (2d Cir unpub 1983) 742
F2d 1436(t); (similarly a non-political fabricated cashier's check, modeled on a
real one, was not made immune from prosecution because the perp labeled it with
the name of a non-existent bank and with some other inconspicuous anomalies) US
v.Van Shutters (6th Cir1998) 163 F3d 331 cert.denied _US_, 119 S.Ct 1480;{the criminal laws against counterfeiting US currency -- which would
include Federal Reserve Notes -- have existed since the beginning of the
Republic;in 1984 Congress added 18
USC sec. 513 which expanded the counterfeiting law to include the fabrication of
state and municipal securities, money orders, travelers checks, cashier's
checks, or corporation stock certificates; and on 30 Sept 1996, Congress added
18 USC sec. 514 which expanded the counterfeiting laws to include
"fictitious obligations" - the legislative history (Sen.Hrg 104-680)
explicitly referred to some of the funny money mentioned in this paragraph and
included photostats of Leroy Schweitzer's "lien drafts",
"comptroller warrants", and "certified bankers checks",
which all claimed to emanate from the "Treasurer united [sic] States of
America / Redeemable at office of Post Master / Payable on Sight" - which
resemblechecks,travelers checks,money orders or other financial instruments even though using
a name or design which is not already used by legitimate financial
instruments.}; in an odd case, submitting a good check to the IRS in only
partial payment of a tax debt exceeding $30Gs with the check in the amount of
only $1200 and with the UCC-type accord and satisfaction written by the perp on
the back of the check that endorsement constitutes a satisfaction of all tax
debts to date, held that the IRS is not "commercial", therefore the
UCC does not control its operations, and the IRS cashing the check does not
satisfy his remaining debt (26 USC 7121 & 7122 provide very specific
procedures for the negotiating of a settlement). Bear v. CIR (12/3/92) TC Memo
1992-690 aff'd (9th Cir 3/24/94) 19 F3d 26(t), 73 AFTR2d 1611; similarly Kadunc
v.CIR (2/24/97) TC Memo 1997-92;-- on the other hand, a Freeman adherent, nailed for passing a Leroy
Schweitzer "certified bankers check comptroller warrant" (he attempted
to pay his court fines with it with an enormous "overpayment" that
would require more than a thousand dollars change in real money!)argued he should not be prosecuted for passing a bad check because this
Leroy Schweitzer document does not constitute a check because not drawn on a
bank and not a clear promise or order to pay, held that it did because it named
the "Treasurer united States of America office of PostMaster" as its
bank (even though nothing with that precise name exists) and it appears to
instruct the "PostMaster"to
"pay to" the recipient on sight.State v. McNeil (Mont.Supm9/17/98);
(this funny money purported to be approved by a federal agency and therefore an
enhanced penalty was justified) US v. Switzer et al (9th Cir unpub 10/5/98);and similarly ("The defendants argue that their conduct did not
constitute mail fraud because their claims about the utility of [their]
Certified Money Orders was so preposterous that no reasonable person would have
acted on them.") US v. Stockheimer [& Peth] (7th Cir 1998) 157 F3d
1082; (this sort of argument backfired, as evidence of the defendants'
fraudulent intent) US v. Switzer et al (9th Cir unpub 10/5/98); (knowledge that
this funny money had already been rejected by banks was sufficient evidence of
fraudulent intent in subsequent efforts to pass it) US v. J.V. Wells (4th Cir
1998) 163 F3d 889;{Although
the mountebanks claim to be fluent in the Uniform Commercial Code, often
erroneouslythinking it is a federal law and that it applies to court and
IRS proceedings, their funny money does not begin to meet the definitions of
"money" set forth in the UCC.The
UCC 1-201(24) defines Money as "a medium of exchange authorized or adopted
by domestic or foreign government as a part of its currency."Although this is more expansive than just legal tender (deliberately more
expansive, according to the UCC official commentary), it must have the approval
of a govt.In fact, the funny money issued by Peth, Schweitzer, et al.,
contains a reference to the same UCC 1-201(24) but cites itfor the expression "credit money", which does not actually
appear anywhere in the UCC and apparently is meaningless; e.g. US v. Moser (5th
Cir 1997) 123 F3d 813 cert. denied 522 US 1035 (in which the originator even
called it "pretend money"), and Ford Motor Credit Co. v. All Ways Inc.
(1996) 249 Neb 923, 546 NW2d 807 (the mention of "credit money"
"eliminates any possibilitythat
the money order" is valid).ditto
(tried to pay his mortgage with a freeman type check at an enormous overpayment
with a demand for a refund of the difference) Bank One of Columbus v. Sparks
(Ohio App unpub 3/15/96)).Similarly,
for checks, drafts, and the like, other than currency,the UCC 3-104 regards all of them as "negotiable instruments"
but only if "payable upon demand or at a definite time" and in a
"sum certain", and almost invariably the funny money indicates payment
only after some (impossible) contingent event, such as the resurrection of the
Republic of Texas or the re-enactment of the 1792 Coinage Act, and then only in
something of unpredictable (or non-existent) value, such as "credit
money".As these documents do
not contain an unconditional promise or order to pay, and they do not promise to
pay in real money, they do not qualify as "negotiable instruments"
according to the UCC.Ford Motor
Credit Co. v. All Ways Inc. (1996) 249 Neb 923, 546 NW2d 807; Bank One of
Columbus v. Sparks (Ohio App unpub 3/15/96).(It should not have to be explained that debts or purchases are not
"paid" simply because a bogus check has been tendered - and it would
be regarded as bogus if it is not convertible to US currencyin a normal way, without exotic or extensive exertions.Although the mountebanks pretend that their funny money cannot be
refused, or if refused that the transaction becomes a gift, UCC 2-511 makes it
clear that any sort of instrument can be refused and legal tender insisted
upon.)}{Recently there have been
several impressive convictions for various kinds of fraud, including postal
fraud and bank fraud, for trafficking in "Leroy checks".These include Margaret Elizabeth Broderick (who called herself "the
Lien Queen") sentenced in March 1997 to 16 years on 26 counts of fraud (she
had boasted of accumulating millions in real money which was stashed someplace
and refused to refund it even for a lighter sentence so the govt was determined
that she should not see that money again); Douglas Fitzgerald sentenced in
October 1998 to 30 months and $30G in fines; Barry Switzer & Julian Cheney,
two associates of Broderick, in October 1998 to five years each; Russell Dean
Landers, of the Montana Freemen, in August 1997 to 30years for fraud and other offenses (his use of bogus liens as "paper
terrorism" earned him the harsh sentence reserved for terrorists); Leonard
Peth, alias L.A. Pethahiah, sentenced to 8 years for issuing phony money orders;Franklin Johnston & Jerry Lyn Wilkins, founders of "USA
First" front for distributing Peth's worthless money orders, 8 years;
Richard McLaren ofthe Republic of
Texas sentenced to 12 years just for his funny money (his separate conviction
for kidnaping didn't help); David Lee Ries, sentenced to five years for making
$13 Million in funny money andtrying
to use it to bail some associates out ofjail
- subsequently sentenced to another 7½ years for plotting to have a county
recorder beaten nearly to death for rejecting his bogus liens;etc.An
interesting argument, not yet used by the govt, is that whoever claims that
their funny money actually has value should be made to pay the corresponding
income tax for it; cf.Andrews v.CIR (2d Cir 1943) 135 F2d 314 cert.den 320 US 748; and, although
ultimately worthless, bogus checks can be counted as proceeds in prosecution for
a money laundering scheme.US v.Akintobi (9th Cir 1998) 159 F3d 401; and similarly the undistributed
bogus checks found in possession of a conspiracy can be counted toward the
magnitude of the fraud being prosecuted.US
v.J.V. Wells (4th Cir 1998) 163
F3d 889. }